Crypto and Stock Investing

  1. Liquidity: Buy and sell orders can be settled in less than two days for stocks and can be placed instantly.
  2. Dividends: Shareholders receive payouts in the form of dividends from companies. Management running the companies decides the payouts. Payouts are usually derived from the profits a business generates.
  3. A Stock Entitles You to a Share of a Company: A stock entitles you to a share of a company. There is no direct connection between the stock price and the financial metrics of a company. Despite this, investors make investment decisions mainly based on financial metrics, macroeconomic indicators, and everyday happenings. These together influence the stock price.
  1. Delisting of companies: There is a high churn rate in stock market indices all over the world. Market disruption and competition are the main indicators of a company’s decreasing lifespan. Heavy losses and high competition are the main reasons companies run out of business. Large-scale capital erosion can occur during the delisting of companies.
  2. Volatility: It is difficult to gain expertise in technical analysis as stock prices move up and down constantly. An investor should always be careful of the ups and downs in the market. A comprehensive understanding of all indicators and research can help you master the art of timing the market. Bull traps and bear traps can lead to a distorted understanding of the market mood. This can lead to investors making bad decisions.
  1. Strong bull and bear movements: Traders can buy low and sell high due to resistance lines and wider support. Investors need to also be wary as this volatility comes with its risks.
  2. Decentralization: Blockchain decentralizes ownership and supports crypto assets’ ability to have immutable transaction records. A community owns the crypto assets, not an organization. The fundamentals of a decentralized coin can not be changed by a central authority.
  3. Future Applications: Crypto investing will have more use cases as Web 3.0 and Defi applications are picking up pace. They make a good option for future wealth creation opportunities.
  4. Finite Supply: Binance Coin, Bitcoin, and other coins have a finite supply of Crypto coins. The price changes only with changing demand for coins with a finite supply. On the other hand, Fiat currencies can be printed by Central Banks and are not backed by commodities. But an increase in supply with the same demand can lead to value erosion. Cryptos are resistant to this as they have a finite supply.
  1. Compliance: Investors should always be updated on the new crypto regulations as the laws have been framed recently by a lot of governments. Many governments are yet to frame laws for crypto investing and trading. Investors should strictly adhere to the tax laws of the country from which they trade.
  2. Volatility: Many investors are still deciphering the use cases of cryptos as it is still a new asset class. This adds to the volatile price movements. A volatile market does present opportunities to make money, but they are also risky in the short term. You need to have good knowledge and research of the market before you make any investment decisions.

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